SPORTSMANS WAREHOUSE HOLDINGS INC

Previous wording

Global economic and business activities continue to face widespread macroeconomic uncertainties, including labor shortages, inflation and monetary supply shifts, high interest rates, recession risks and potential disruptions from the Russia-Ukraine conflict and rising global political tensions. Our results may also be impacted by the upcoming presidential election this year. In fiscal year 2023 and continuing into the first half of fiscal year 2024 our business was impacted by consumer inflationary pressures and recession concerns. As a result of our recent performance, we have taken steps to reduce our total inventory, implement cost reduction measures to reflect current sales trends and reduce investments in future new store openings. We currently do not plan to open any new stores during fiscal year 2024.

Current wording

Global economic and business activities continue to face widespread macroeconomic uncertainties, including labor shortages, inflation and monetary supply shifts, elevated interest rates, recession risks and potential disruptions from the Russia-Ukraine conflict and rising global political tensions. Our results may also be impacted by the upcoming change in the presidential administration. In fiscal year 2023 and continuing into fiscal year 2024 our business was impacted by consumer inflationary pressures and recession concerns. As a result of our recent performance, we have taken steps to reduce our total inventory, implement cost reduction measures to reflect current sales trends and reduce investments in future new store openings. We currently do not plan to open any new stores for the remainder of fiscal year 2024 and we plan to open one new store in fiscal year 2025.

Previous wording

macroeconomic factors, political trends, social unrest, inflationary pressures, recessionary trends, labor shortages, monetary supply shifts, high interest rates, tightening of credit markets, and potential disruptions from the ongoing Russia-Ukraine conflict and rising global political tensions and pandemics;

Current wording

macroeconomic factors, political trends, social unrest, inflationary pressures, recessionary trends, labor shortages, monetary supply shifts, elevated interest rates, tightening of credit markets, and potential disruptions from the ongoing Russia-Ukraine conflict and rising global political tensions;

Previous wording

Opening new stores and acquiring store locations is also an important part of our long-term growth strategy. During fiscal year 2023, we opened 15 new stores. We currently do not plan to open any new stores during fiscal year 2024. We may deviate from this target if attractive opportunities are presented to open stores or acquire new store locations outside of our target growth rate.

Current wording

Opening new stores and acquiring store locations is also an important part of our long-term growth strategy. During fiscal year 2023, we opened 15 new stores. We have not opened any new stores in fiscal year 2024 and do not plan to open any new stores for the remainder of fiscal year 2024. We plan to open one new store in fiscal year 2025. We may deviate from this target if attractive opportunities are presented to open stores or acquire new store locations outside of our target growth rate.

Previous wording

We believe the key drivers to improving our gross margin are increasing the product mix to higher margin products, particularly apparel and footwear, increasing foot traffic within our stores and traffic to our website, improving buying opportunities with our vendor partners and coordinating pricing strategies among our stores and our merchandise group. Our ability to properly manage our inventory can also impact our gross margin. Successful inventory management ensures we have sufficient high margin products in stock at all times to meet customer demand, while overstocking of items could lead to markdowns in order to help a product sell. During fiscal year 2023, we commenced an effort to reduce our inventory and initiated various strategic promotional efforts as part of this plan, which impacted our gross margins during fiscal year 2023. At the end of fiscal year 2023, we completed our inventory reduction plan. During the first half of fiscal year 2024 our gross margins have begun to return to rates more in line with historical numbers when compared to the second half of fiscal year 2023. We believe that the overall growth of our business can also help improve our gross margins, because increased merchandise volumes will enable us to maintain our strong relationships with our vendors. If we see significant declines in sales or increases in overstocked inventory, we may experience a decline in gross margins as we use promotions to drive traffic and reduce inventory.

Current wording

We believe the key drivers to improving our gross margin are increasing the product mix to higher margin products, particularly apparel and footwear, increasing foot traffic within our stores and traffic to our website, improving buying opportunities with our vendor partners and coordinating pricing strategies among our stores and our merchandise group. Our ability to properly manage our inventory can also impact our gross margin. Successful inventory management ensures we have sufficient high margin products in stock at all times to meet customer demand, while overstocking of items could lead to markdowns in order to help a product sell. During fiscal year 2023, we commenced an effort to reduce our inventory and initiated various strategic promotional efforts as part of this plan, which impacted our gross margins during fiscal year 2023. At the end of fiscal year 2023, we completed our inventory reduction plan. For fiscal year 2024, high inflation has continued to adversely impact our gross margins. We believe that the overall growth of our business can also help improve our gross margins, because increased merchandise volumes will enable us to maintain our strong relationships with our vendors. If we see significant declines in sales or increases in overstocked inventory, we may experience a decline in gross margins as we use promotions to drive traffic and reduce inventory.

Previous wording

Net Sales and Same Store Sales. Net sales decreased by $44 million, or 7.6%, to $533 million during the 26 weeks ended August 3, 2024 compared to $577 million in the corresponding period of fiscal year 2023. Our net sales decreased primarily due to the continued impact of consumer inflationary pressures on discretionary spending, resulting in a decline in store traffic and lower demand across most product categories. This decrease was partially offset by same store sales growth in our fishing department and our opening of 6 new stores since July 29, 2023. Stores that have been open for less than 12 months and were, therefore, not included in our same store sales, contributed $26.8 million to net sales. E-commerce driven sales comprised more than 19% of total sales for the 26 weeks ended August 3, 2024. Same store sales decreased by 11.5% during the 26 weeks ended August 3, 2024 compared to the corresponding 26-week period of fiscal year 2023, primarily as a result of the factors discussed above that impacted net sales.

Current wording

Net Sales and Same Store Sales. Net sales decreased by $16.3 million, or 4.8%, to $324.3 million during the 13 weeks ended November 2, 2024 compared to $340.6 million in the corresponding period of fiscal year 2023. Our net sales decreased primarily due to the continued impact of consumer inflationary pressures on discretionary spending, resulting in a decline in store traffic and lower demand, particularly in ammunition, and across our Apparel and Footwear departments. This decrease was partially offset by net sales growth in our Fishing, Optics, Electronics, Accessories and Other and Camping departments. Stores that have been open for less than 12 months and were, therefore, not included in our same store sales, contributed $4.0 million to net sales. E-commerce driven sales comprised more than 18% of total sales for the 13 weeks ended November 2, 2024. Same store sales decreased by 5.7% during the 13 weeks ended November 2, 2024 compared to the corresponding 13-week period of fiscal year 2023, primarily as a result of inflationary pressures on consumer discretionary spending.

Previous wording

Electronics, Accessories and Other departments saw net sales decreases of $29.2 million, $7.8 million, $7.0 million, $3.8 million and $2.8 million, respectively, during the 26 weeks ended August 3, 2024 compared to the corresponding period of fiscal year 2023. Within our Hunting and Shooting department, our ammunition and firearm categories saw decreases of $12.8 million and $11.8 million or 14.2% and 8.2%, respectively, during the 26 weeks ended August 3, 2024 compared to the corresponding period of fiscal year 2023. The decreases in the firearm and ammunition categories were primarily due to the impact of consumer inflationary pressures on discretionary spending. This was partially offset by our opening of 6 new stores since July 29, 2023.

Current wording

Our Optics, Electronics, Accessories and Other, Fishing and Camping departments saw net sales increases of $1.7 million, $1.0 million and $0.1 million, respectively, during the 13 weeks ended November 2, 2024 compared to the corresponding period of fiscal year 2023 primarily driven by our reset of fishing inventory and the opening of 1 new store since October 28, 2023. Our Apparel, Footwear and Hunting and Shooting departments saw net sales decreases of $10.3 million, $6.6 million and $2.2 million, respectively, during the 13 weeks ended November 2, 2024 compared to the corresponding period of fiscal year 2023. Within our Hunting and Shooting department, our ammunition and firearm categories saw decreases of $5.9 million and $0.7 million or 10.7% and 1.1%, respectively, during the 13 weeks ended November 2, 2024 compared to the corresponding period of fiscal year 2023. The decreases in the firearm and ammunition categories were primarily due to the impact of consumer inflationary pressures on discretionary spending. This was partially offset by our opening of 1 new store since October 28, 2023.

Previous wording

With respect to same store sales, during the 26 weeks ended August 3, 2024, our Fishing department saw an increase of 5.4% compared to the corresponding period of fiscal year 2023. Our Footwear, Apparel, Hunting and Shooting, Optics, Electronics, Accessories and Other and Camping departments saw same store sales decreases of 22.7%, 21.5%, 13.2%, 11.5% and 8.3%, respectively, during the 26 weeks ended August 3, 2024 compared to the corresponding period of fiscal year 2023. These changes were primarily driven by the items noted above for net sales. As of August 3, 2024, 140 stores were included in our same store sales calculation.

Current wording

With respect to same store sales, during the 13 weeks ended November 2, 2024, our Fishing and Optics, Electronics, Accessories and Other departments saw increases of 3.2% and 2.6%, respectively, compared to the corresponding period of fiscal year 2023. Our Apparel, Footwear, Hunting and Shooting and Camping departments saw same store sales decreases of 28.3%, 25.4%, 2.0% and 0.4%, respectively, during the 13 weeks ended November 2, 2024 compared to the corresponding period of fiscal year 2023. These changes were primarily driven by the items noted above for net sales. As of November 2, 2024, 145 stores were included in our same store sales calculation.

Previous wording

Gross Profit. Gross profit decreased by $10.8 million, or 10.7%, to $90 million during the 13 weeks ended August 3, 2024 compared to $100.8 million for the corresponding period of fiscal year 2023. As a percentage of net sales, gross profit decreased to 31.2% during the 13 weeks ended August 3, 2024, compared to 32.6% for the corresponding period of fiscal year 2023, primarily driven by increased shrink and reduced product margins from seasonal markdowns in our Camping and Apparel departments.

Current wording

Gross Profit. Gross profit decreased by $0.1 million, or 0.1%, to $103.1 million during the 13 weeks ended November 2, 2024 compared to $103.2 million for the corresponding period of fiscal year 2023. As a percentage of net sales, gross profit increased to 31.8% during the 13 weeks ended November 2, 2024, compared to 30.3% for the corresponding period of fiscal year 2023, primarily driven by increased product margins in our Apparel and Footwear departments, partially offset by increased freight and shrink.

Previous wording

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses decreased by $8.0 million, or 7.8%, to $94.3 million during the 13 weeks ended August 3, 2024, compared to $102.3 million for the corresponding period of fiscal year 2023. This decrease was primarily the result of decreases in payroll and pre-opening expenses of $5.7 million and $2.2 million, respectively, during the 13 weeks ended August 3, 2024. These reductions were primarily related to increased operational efficiencies and the decision to not open new stores during the current year. These decreases were partially offset by increases of $1.2 million and $1.1 million in depreciation and rent expenses, respectively, during the 13 weeks ended August 3, 2024 primarily as a result of opening 6 new stores since July 29, 2023.

Current wording

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses decreased by $0.1 million, or 0.1%, to $100 million during the 13 weeks ended November 2, 2024, compared to $100.1 million for the corresponding period of fiscal year 2023. This decrease was primarily the result of decreases in payroll, pre-opening and depreciation expenses of $0.9 million, $0.9 million and $0.7 million, respectively, during the 13 weeks ended November 2, 2024. These reductions were primarily related to increased operational efficiencies and the decision to not open new stores during the current fiscal year. The decreases were offset by an increase of $0.9 million in rent expense, primarily as a result of inflation, and a $1.8 million legal settlement during the 13 weeks ended November 2, 2024.

Previous wording

On a per store basis, our payroll and other operating expenses decreased approximately 17% and 3%, respectively, compared to the corresponding period of fiscal year 2023. As a percentage of net sales, selling, general, and administrative expenses decreased to 32.7% of net sales in the second quarter of fiscal year 2024, compared to 33.1% of net sales in the second quarter of fiscal year 2023, as a result of the factors discussed above.

Current wording

On a per store basis, our payroll expense decreased approximately 3% compared to the corresponding period of fiscal year 2023. On a per store basis, our other operating expenses increased approximately 2% compared to the corresponding period of fiscal year 2023 as we increased marketing spend to help drive sales. As a percentage of net sales, selling, general, and administrative expenses increased to 30.8% of net sales in the third quarter of fiscal year 2024, compared to 29.4% of net sales in the third quarter of fiscal year 2023, as a result of the factors discussed above.

Previous wording

Interest Expense. Interest expense decreased by $0.3 million, or 8.6%, to $3.2 million during the 13 weeks ended August 3, 2024, compared to $3.5 million for the corresponding period of fiscal year 2023. The decrease in interest expense was primarily driven by decreased borrowings on our revolving credit facility partially offset by higher interest rates during the second quarter of fiscal year 2024 compared to the corresponding period of fiscal year 2023.

Current wording

Interest Expense. Interest expense decreased by $0.6 million, or 15.4%, to $3.3 million during the 13 weeks ended November 2, 2024, compared to $3.9 million for the corresponding period of fiscal year 2023. The decrease in interest expense was primarily driven by decreased gross borrowings under our revolving credit and term loan facilities partially offset by a higher weighted average interest rate during the third quarter of fiscal year 2024 compared to the corresponding period of fiscal year 2023.

Previous wording

Income Taxes. We recognized income tax benefit of $2.1 million during the 13 weeks ended August 3, 2024 compared to an income tax benefit of $1.8 million during the corresponding period of fiscal year 2023. Our effective tax rates during the 13 weeks ended August 3, 2024 and July 29, 2023 were 25.8% and 34.8%, respectively. Our effective tax rate will generally differ from the U.S. Federal statutory rate of 21.0%, due to state taxes, permanent items, and discrete items relating to stock award deductions.

Current wording

Income Taxes. We recognized income tax expense of $0.2 million during the 13 weeks ended November 2, 2024 compared to an income tax expense of $0.5 million during the corresponding period of fiscal year 2023. Our effective tax rates during the 13 weeks ended November 2, 2024 and October 28, 2023 were -80.2% and -52.6%, respectively. Our effective tax rate will generally differ from the U.S. Federal statutory rate of 21.0%, due to state taxes, permanent items, and discrete items relating to stock award deductions.

Previous wording

Net Sales and Same Store Sales. Net sales decreased by $20.8 million, or 6.7%, to $288.7 million during the 13 weeks ended August 3, 2024 compared to $309.5 million in the corresponding period of fiscal year 2023. Our net sales decreased primarily due to the continued impact of consumer inflationary pressures on discretionary spending, resulting in a decline in store traffic and lower demand across most product categories. This decrease was partially offset by same store sales growth in our fishing department and our opening of 6 new stores since July 29, 2023. Stores that have been open for less than 12 months and were, therefore, not included in our same store sales, contributed $11.2 million to net sales. E-commerce driven sales comprised more than 19% of total sales for the 13 weeks ended August 3, 2024. Same store sales decreased by 9.8% during the 13 weeks ended August 3, 2024 compared to the corresponding 13-week period of fiscal year 2023, primarily as a result of the factors discussed above that impacted net sales.

Current wording

Net Sales and Same Store Sales. Net sales decreased by $60.4 million, or 6.6%, to $857.2 million during the 39 weeks ended November 2, 2024 compared to $917.6 million in the corresponding period of fiscal year 2023. Our net sales decreased primarily due to the continued impact of consumer inflationary pressures on discretionary spending, resulting in a decline in store traffic and lower demand across most product categories. This decrease was partially offset by same store sales growth in our Fishing department and our opening of 1 new store since October 28, 2023. Stores that have been open for less than 12 months and were, therefore, not included in our same store sales, contributed $30.8 million to net sales. E-commerce driven sales comprised more than 19% of total sales for the 39 weeks ended November 2, 2024. Same store sales decreased by 9.4% during the 39 weeks ended November 2, 2024 compared to the corresponding 39-week period of fiscal year 2023, primarily as a result of the factors discussed above that impacted net sales.

Previous wording

Our Fishing department saw a net sales increase of $4.1 million during the 13 weeks ended August 3, 2024 compared to the corresponding period of fiscal year 2023 primarily driven by our reset of fishing inventory and the opening of 6 new stores since July 29, 2023. Our Hunting and Shooting, Footwear, Camping, Apparel and Optics, Electronics, Accessories and Other departments saw net sales decreases of $16.3 million, $2.8 million, $2.3 million, $2.0 million and $1.4 million, respectively, during the 13 weeks ended August 3, 2024 compared to the corresponding period of fiscal year 2023. Within our Hunting and Shooting department, our ammunition and firearm categories saw decreases of $8.1 million and $6.0 million or 18.3% and 9.2%, respectively, during the 13 weeks ended August 3, 2024 compared to the corresponding period of fiscal year 2023. The decreases in the firearm and ammunition categories were primarily due to the impact of consumer inflationary pressures on discretionary spending. This was partially offset by our opening of 6 new stores since July 29, 2023.

Current wording

Our Fishing department saw a net sales increase of $7.6 million during the 39 weeks ended November 2, 2024 compared to the corresponding period of fiscal year 2023 primarily driven by our reset of fishing inventory and the opening of 1 new store since October 28, 2023. Our Hunting and Shooting, Apparel, Footwear, Camping and Optics, Electronics, Accessories and Other departments saw net sales decreases of $31.4 million, $17.3 million, $14.4 million, $3.7 million and $1.2 million, respectively, during the 39 weeks ended November 2, 2024 compared to the corresponding period of fiscal year 2023. Within our Hunting and Shooting department, our ammunition and firearm categories saw decreases of $18.7 million and $12.6 million or 12.9% and 5.9%, respectively, during the 39 weeks ended November 2, 2024 compared to the corresponding period of fiscal year 2023. The decreases in the firearm and ammunition categories were primarily due to the impact of consumer inflationary pressures on discretionary spending. This was partially offset by our opening of 1 new store since October 28, 2023.

Previous wording

With respect to same store sales, during the 13 weeks ended August 3, 2024, our Fishing department saw an increase of 6.1% compared to the corresponding period of fiscal year 2023. Our Footwear, Hunting and Shooting, Apparel, Optics, Electronics, Accessories and Other and Camping departments saw same store sales decreases of 15.2%, 13.6%, 12.8%, 11.7% and 7.0%, respectively, during the 13 weeks ended August 3, 2024 compared to the corresponding period of fiscal year 2023. These changes were primarily driven by the items noted above for net sales. As of August 3, 2024, 140 stores were included in our same store sales calculation.

Current wording

With respect to same store sales, during the 39 weeks ended November 2, 2024, our Fishing department saw an increase of 4.8% compared to the corresponding period of fiscal year 2023. Our Apparel, Footwear, Hunting and Shooting, Camping and Optics, Electronics, Accessories and Other departments saw same store sales decreases of 24.8%, 23.8%, 9.1%, 5.6% and 5.3%, respectively, during the 39 weeks ended November 2, 2024 compared to the corresponding period of fiscal year 2023. These changes were primarily driven by the items noted above for net sales. As of November 2, 2024, 145 stores were included in our same store sales calculation.

Previous wording

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses decreased by $12.6 million, or 6.2%, to $188.8 million during the 26 weeks ended August 3, 2024, compared to $201.3 million for the corresponding period of fiscal year 2023. This decrease was primarily the result of decreases in payroll and pre-opening expenses of $10.8 million and $4.4 million, respectively, during the 26 weeks ended August 3, 2024 primarily related to our ongoing cost reduction efforts and decision to not open new stores during the current year. These decreases were partially offset by increases of $3.2 million and $2.8 million in rent and depreciation expenses, respectively, during the 26 weeks ended August 3, 2024 primarily as a result of opening 6 new stores since July 29, 2023.

Current wording

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses decreased by $12.7 million, or 4.2%, to $288.7 million during the 39 weeks ended November 2, 2024, compared to $301.5 million for the corresponding period of fiscal year 2023. This decrease was primarily the result of decreases in payroll and pre-opening expenses of $11.6 million and $5.4 million, respectively, during the 39 weeks ended November 2, 2024 primarily related to our ongoing cost reduction efforts and decision to not open new stores during the current fiscal year. These decreases were partially offset by increases of $4.1 million and $2.1 million in rent and depreciation expenses, respectively, during the 39 weeks ended November 2, 2024 primarily as a result of opening 1 new store since October 28, 2023.

Previous wording

On a per store basis, our payroll and other operating expenses decreased approximately 18% and 8%, respectively, compared to the corresponding period of fiscal year 2023. As a percentage of net sales, selling, general, and administrative expenses increased to 35.4% of net sales during the 26 weeks ended August 3, 2024, compared to 34.9% of net sales in the second quarter of fiscal year 2023, primarily driven by lower net sales.

Current wording

On a per store basis, our payroll and other operating expenses decreased approximately 13% and 5%, respectively, compared to the corresponding period of fiscal year 2023. As a percentage of net sales, selling, general, and administrative expenses increased to 33.6% of net sales during the 39 weeks ended November 2, 2024, compared to 32.9% of net sales in the third quarter of fiscal year 2023, primarily driven by lower net sales.

Previous wording

Interest Expense. Interest expense increased by $0.5 million, or 8.9%, to $6.1 million during the 26 weeks ended August 3, 2024, compared to $5.6 million for the corresponding period of fiscal year 2023. The increase in interest expense was primarily driven by higher interest rates during the 26 weeks ended August 3, 2024 compared to the corresponding period of fiscal year 2023.

Current wording

Interest Expense. Interest expense decreased by $0.1 million, or 1.1%, to $9.4 million during the 39 weeks ended November 2, 2024, compared to $9.5 million for the corresponding period of fiscal year 2023. The decrease in interest expense was primarily driven by decreased gross borrowings under our revolving credit and term loan facilities, partially offset by higher weighted average interest rates during the 39 weeks ended November 2, 2024 compared to the corresponding period of fiscal year 2023.

Previous wording

Income Taxes. We recognized income tax benefit of $7.5 million during the 26 weeks ended August 3, 2024 compared to an income tax benefit of $7.1 million during the corresponding period of fiscal year 2023. Our effective tax rates during the 26 weeks ended August 3, 2024 and July 29, 2023 were 23.9% and 27.3%, respectively. Our effective tax rate will generally differ from the U.S. Federal statutory rate of 21.0%, due to state taxes, permanent items, and discrete items relating to stock award deductions.

Current wording

Income Taxes. We recognized income tax benefit of $7.4 million during the 39 weeks ended November 2, 2024 compared to an income tax benefit of $6.7 million during the corresponding period of fiscal year 2023. Our effective tax rates during the 39 weeks ended November 2, 2024 and October 28, 2023 were 23.2% and 24.8%, respectively. Our effective tax rate will generally differ from the U.S. Federal statutory rate of 21.0%, due to state taxes, permanent items, and discrete items relating to stock award deductions.

Previous wording

As of August 3, 2024, we had cash and cash equivalents of $2.6 million and working capital, consisting of current assets less current liabilities, of $69.5 million. We also had $97.3 million available for borrowing under our senior secured revolving credit facility and our term loan facility as of August 3, 2024, calculated based upon certain borrowing base restrictions for each of the revolving credit facility and term loan facility.

Current wording

As of November 2, 2024, we had cash and cash equivalents of $2.7 million and working capital, consisting of current assets less current liabilities, of $75.8 million. We also had $148.1 million available for borrowing under our senior secured revolving credit facility and our term loan facility as of November 2, 2024, calculated based upon certain borrowing base restrictions for each of the revolving credit facility and term loan facility.

Previous wording

Our primary cash requirements are for seasonal working capital needs and capital expenditures related to ongoing operational needs and new system investments. For both the short-term and the long-term, our primary sources of cash are borrowings under our senior secured revolving credit facility, our term loan facility and operating cash flows. We believe that our cash on hand, cash generated by operating activities and funds available under our revolving credit facility and term loan facility will be sufficient to finance our operating activities and meet our cash requirements for at least the next twelve months and beyond. With no new stores planned for the remainder of fiscal year 2024, we intend to prioritize the repayment of outstanding debt with any excess cash flow.

Current wording

Our primary cash requirements are for seasonal working capital needs and capital expenditures related to ongoing operational needs and new system investments. For both the short-term and the long-term, our primary sources of cash are borrowings under our senior secured revolving credit facility, our term loan facility and operating cash flows. We believe that our cash on hand, cash generated by operating activities and funds available under our revolving credit facility and term loan facility will be sufficient to finance our operating activities and meet our cash requirements for at least the next twelve months and beyond. With no new stores planned for the remainder of fiscal year 2024, and only one new store planned for fiscal year 2025, we intend to prioritize the repayment of outstanding debt with any excess cash flow.

Previous wording

Operating Lease Obligations. Operating lease commitments consist principally of leases for our retail stores, corporate office and distribution center. Our leases often include options which allow us to extend the terms beyond the initial lease term. As of August 3, 2024, our expected operating lease payments for the remainder of fiscal year 2024 are $37.4 million and our total committed lease payments are $480.7 million. Other operating lease obligations consist of distribution center equipment. See Note 6, “Leases” to our unaudited condensed consolidated financial statements included in this 10-Q.

Current wording

Operating Lease Obligations. Operating lease commitments consist principally of leases for our retail stores, corporate office and distribution center. Our leases often include options which allow us to extend the terms beyond the initial lease term. As of November 2, 2024, our expected operating lease payments for the remainder of fiscal year 2024 and fiscal year 2025 are $18.7 million and $72.8 million, respectively. Our total committed lease payments are $471.3 million. Other operating lease obligations consist of distribution center equipment. See Note 6, “Leases” to our unaudited condensed consolidated financial statements included in this 10-Q.

Previous wording

Capital Expenditures. During the 26 weeks ended August 3, 2024, we incurred approximately $7.7 million in capital expenditures primarily related to strategic technological investments and general store maintenance. We expect capital expenditures, net of tenant allowances, between $20 million and $25 million for fiscal year 2024 (inclusive of amounts spent during the 26 weeks ended August 3, 2024) primarily related to strategic technological investments, such as planogramming, merchandising and replenishment and store scheduling tools, and general store fleet maintenance. We intend to fund these capital expenditures with our operating cash flows, cash on hand and funds available under our revolving credit facility. Other investment opportunities, such as potential strategic acquisitions or store expansion rates in excess of those presently planned, may require additional funding.

Current wording

Capital Expenditures. During the 39 weeks ended November 2, 2024, we incurred approximately $11.3 million in capital expenditures primarily related to strategic technological investments and general store maintenance. We expect capital expenditures, net of tenant allowances, between $17 million and $20 million for fiscal year 2024 (inclusive of amounts spent during the 39 weeks ended November 2, 2024) primarily related to strategic technological investments, such as planogramming, merchandising and replenishment and store scheduling tools, and general store fleet maintenance. We intend to fund these capital expenditures with our operating cash flows, cash on hand and funds available under our revolving credit facility. Other investment opportunities, such as potential strategic acquisitions or store expansion rates in excess of those presently planned, may require additional funding.

Previous wording

Principal and Interest Payments. We maintain a $350.0 million revolving credit facility and a $45.0 million term loan facility. As of August 3, 2024, $144.7 million was outstanding under the revolving credit facility and $25.0 million was outstanding under the term loan facility. Assuming no additional repayments or borrowings on our revolving credit facility and our term loan facility after August 3, 2024, our interest payments would be approximately $6.3 million for the remainder of fiscal year 2024 based on the interest rate as of August 3, 2024. As of August 3, 2024, our weighted average interest rate on the amounts outstanding under our revolving credit facility and term loan facility was 7.40%. See below under “Indebtedness” for additional information regarding our revolving credit facility and term loan facility, including the interest rates applicable to any borrowing under such facilities.

Current wording

Principal and Interest Payments. We maintain a $350.0 million revolving credit facility and a $45.0 million term loan facility. As of November 2, 2024, $145.7 million was outstanding under the revolving credit facility and $25.0 million was outstanding under the term loan facility. Assuming no additional repayments or borrowings on our revolving credit facility and our term loan facility after November 2, 2024, our interest payments would be approximately $3.0 million for the remainder of fiscal year 2024 and approximately $12.0 million for fiscal year 2025, in each case, based on the interest rate as of November 2, 2024. As of November 2, 2024, our weighted average interest rate on the amounts outstanding under our revolving credit facility and term loan facility was 7.02%. See below under “Indebtedness” for additional information regarding our revolving credit facility and term loan facility, including the interest rates applicable to any borrowing under such facilities.

Previous wording

Net cash used in operating activities was $16.1 million for the 26 weeks ended August 3, 2024, compared to net cash used in operating activities was $58.3 million for the corresponding period of fiscal year 2023, a decrease of approximately $42.2 million. The decrease in our cash flows used in operating activities was primarily driven by reduced inventory build up during the 26 weeks ended August 3, 2024 compared to the corresponding period of fiscal year 2023.

Current wording

Net cash used in operating activities was $18.7 million for the 39 weeks ended November 2, 2024, compared to net cash used in operating activities was $16.6 million for the corresponding period of fiscal year 2023, an increase of approximately $2.1 million. The increase in our cash flows used in operating activities was primarily driven by reduced net income during the 39 weeks ended November 2, 2024 compared to the corresponding period of fiscal year 2023.

Previous wording

Net cash used in investing activities was $7.6 million for the 26 weeks ended August 3, 2024, compared to net cash used in investing activities was $52.0 million for the corresponding period of fiscal year 2023, a decrease of approximately $44.4 million, which was primarily driven by reduced capital expenditures related to the construction of new stores and the refurbishment of existing stores during the 26 weeks ended August 3, 2024 compared to the corresponding period of fiscal year 2023.

Current wording

Net cash used in investing activities was $11.3 million for the 39 weeks ended November 2, 2024, compared to net cash used in investing activities was $71.2 million for the corresponding period of fiscal year 2023, a decrease of approximately $59.9 million, which was primarily driven by reduced capital expenditures related to the construction of new stores and the refurbishment of existing stores during the 39 weeks ended November 2, 2024 compared to the corresponding period of fiscal year 2023.

Previous wording

Net cash provided by financing activities was $23.2 million for the 26 weeks ended August 3, 2024, compared to net cash provided by financing activities was $110.8 million for the corresponding period of fiscal year 2023, a decrease of approximately $87.6 million. The decrease in cash provided by financing activities was primarily the result of decreased incremental borrowings under our revolving credit facility.

Current wording

Net cash provided by financing activities was $29.4 million for the 39 weeks ended November 2, 2024, compared to net cash provided by financing activities was $88.3 million for the corresponding period of fiscal year 2023, a decrease of approximately $58.9 million. The decrease in cash provided by financing activities was primarily the result of decreased incremental borrowings under our revolving credit facility.

Previous wording

We maintain a $350.0 million revolving credit facility, with $144.7 million outstanding as of August 3, 2024. Our revolving credit facility is governed by an amended and restated credit agreement with a consortium of banks led by Wells Fargo Bank, National Association (“Wells Fargo”). We additionally entered into a term loan credit facility on July 30, 2024 with an aggregate principal amount available of $45.0 million, with $25.0 million outstanding as of August 3, 2024. Borrowings under our revolving credit facility and term loan facility are subject to a borrowing base calculation. As of August 3, 2024, we had an aggregate amount of $97.3 million available for borrowing under our revolving credit facility and our term loan facility, calculated based upon certain borrowing base restrictions, and $2.0 million in stand-by commercial letters of credit.

Current wording

We maintain a $350.0 million revolving credit facility, with $145.7 million outstanding as of November 2, 2024. Our revolving credit facility is governed by an amended and restated credit agreement with a consortium of banks led by Wells Fargo Bank, National Association (“Wells Fargo”). We additionally entered into a term loan credit facility on July 30, 2024 with an aggregate principal amount available of $45.0 million, with $25.0 million outstanding as of November 2, 2024. Borrowings under our revolving credit facility and term loan facility are subject to a borrowing base calculation. As of November 2, 2024, we had an aggregate amount of $148.1 million available for borrowing under our revolving credit facility and our term loan facility, calculated based upon certain borrowing base restrictions, and $2.0 million in stand-by commercial letters of credit.

Previous wording

EBITDA for that period divided by the net sales for that period. We consider Adjusted EBITDA and Adjusted EBITDA margin important supplemental measures of our operating performance and believe they are frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. Other companies in our industry, however, may calculate Adjusted EBITDA and Adjusted EBITDA margin differently than we do. Management also uses Adjusted EBITDA and Adjusted EBITDA margin as additional measurement tools for purposes of business decision-making, including evaluating store performance, developing budgets and managing expenditures. Management believes Adjusted EBITDA and Adjusted EBITDA margin allow investors to evaluate our operating performance and compare our results of operations from period to period on a consistent basis by excluding items that management does not believe are indicative of our core operating performance.

Current wording

In evaluating our business, we use Adjusted EBITDA and Adjusted EBITDA margin as supplemental measures of our operating performance. We define Adjusted EBITDA as net (loss) income plus interest expense (benefit), income tax expense (benefit), depreciation and amortization, stock-based compensation expense, transition and severance costs related to director and officer transitions, and other gains, losses and expenses that we do not believe are indicative of our ongoing expenses. Net loss is the most comparable GAAP financial measure to Adjusted EBITDA. We define Adjusted EBITDA margin as, for any period, the Adjusted EBITDA for that period divided by the net sales for that period. We consider Adjusted EBITDA and Adjusted EBITDA margin important supplemental measures of our operating performance and believe they are frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. Other companies in our industry, however, may calculate Adjusted EBITDA and Adjusted EBITDA margin differently than we do. Management also uses Adjusted EBITDA and Adjusted EBITDA margin as additional measurement tools for purposes of business decision-making, including evaluating store performance, developing budgets and managing expenditures. Management believes Adjusted EBITDA and Adjusted EBITDA margin allow investors to evaluate our operating performance and compare our results of operations from period to period on a consistent basis by excluding items that management does not believe are indicative of our core operating performance.

Previous wording

Represents a legal settlement and related fees and expenses.

Current wording

Represents costs related to legal settlements and related fees and expenses.